Recently, a tip from an automotive blogger spread rapidly within the industry: A leading luxury joint venture brand is set to implement organizational optimization affecting approximately 8% of its workforce, citing accelerated NEV transitions and mounting brand transformation pressures. While the brand remains unnamed, the disclosure has once again spotlighted the anxieties of traditional fuel vehicle automakers, particularly joint venture luxury brands, amid the current market environment.

Behind this lies a structural transformation in China's automotive market—fuel vehicle retail sales are declining at an accelerated rate, NEV penetration has historically surpassed the 60% threshold, and domestic brands are mounting a comprehensive counteroffensive in electrification and intelligence. Joint venture luxury brands are collectively facing a critical strategic crossroads.

▍Penetration Exceeds 60%, Signaling Accelerated Contraction of Fuel Vehicle Market

If the decline of fuel vehicles in 2025 was gradual, the 2026 data signals a full-scale acceleration. Data from the China Passenger Car Association (CPCA) shows that in April 2026, nationwide passenger car retail sales reached 1.384 million units, down 21.5% year-on-year and 16.0% month-on-month. Among them, conventional fuel passenger car retail sales plummeted to just 530,000 units, a 37% year-on-year drop. The structural share of fuel vehicle sales in the overall decline continues to rise—accounting for 40% of total passenger car reductions in January-February, 52% in March, and a staggering 84% by April, becoming the primary drag on the market.

Cui Dongshu, Secretary-General of the CPCA, analyzed: "Driven by both cost anxieties and evolving consumer expectations, demand is rapidly shifting from fuel vehicles to NEVs, creating an irreversible 'oil-electric divergence' in the market." Persistent high fuel prices, more rational consumer decisions post-subsidy phase-out, and the generational advantage of NEVs in intelligent experiences are collectively reshaping car purchase (car-buying) logic.

Meanwhile, NEV retail penetration historically surpassed 60% in April, reaching 61.4%, a 9.7 percentage point increase year-on-year. This means that for every 10 new vehicles sold domestically, over 6 now bear green license plates. Among domestic brands, NEV penetration reached 80.1%, contrasting sharply with just 14.1% for mainstream joint venture brands. This nearly 66-percentage-point gap vividly illustrates the current dilemma of joint venture automakers.

Beyond macro data, shifts in sales rankings are even more noteworthy. In April's domestic passenger car retail sales top 10, only one fuel vehicle model remained (Geely BinYue). Flashback to January, fuel vehicles still held 7 spots; by February, 6; March, 5; and April, just 1. In four months, fuel vehicles' dominance at the sales summit shrank from "half the market" to a "lone survivor," retreating far faster than market expectations.

Consider the sedan market, once a core stronghold for joint ventures. In April, sedan retail sales hit 560,000 units, down 31.7% year-on-year and 16.9% month-on-month. Cui Dongshu noted that high fuel prices particularly impacted the A-class sedan segment, where fuel vehicles dominate. Under dual pressure from pricing and energy efficiency of plug-in hybrids like BYD Qin PLUS DM-i and Destroyer 05, traditional mainstream family sedans are rapidly losing ground.

However, market chill is not universal. Passenger vehicle exports reached 769,000 units in April, up 80.7% year-on-year, with NEVs accounting for 52.7% of total exports—the first time exceeding half. Domestic retail pressures contrast with overseas surges, revealing a key truth: China's automotive manufacturing competitiveness remains intact, but domestic demand is undergoing structural migration. The root issue lies not in supply but in demand-side shifts outpacing traditional automakers' strategic adjustments.

▍Industry Giants "Downsize," Anxiety Reaches Organizational Fringes

In Q1 2026 earnings reports, Germany's luxury trio—Mercedes-Benz, BMW, and Audi—all posted "declines" in their China performance. Mercedes sold 111,600 units in Q1, down 26.9% year-on-year, the steepest drop among its global major markets; in contrast, its North American sales grew 16.5% same period (year-on-year). BMW sold 144,000 units, down 10%, also the largest decline among its top three markets. Audi sold 127,000 units, down 12%. Combined, the three lost nearly 80,000 units in China in a single quarter.

Profitability also suffered: Mercedes' Q1 net profit fell 17.2% year-on-year, BMW's dropped 23.1%, and Audi's declined 11.2%. China, once a profit engine, now drags heavily on performance. BMW Chairman Oliver Zipse, at the earnings briefing, dismissed this as "normalization" during China's market transition to local manufacturers, insisting "China will remain BMW's largest market." However, voices in the market question whether "normalization" implies further market share concessions to local NEV brands like NIO, Li Auto, and Seres, casting doubt on optimism.

Amid sustained performance pressures, all three luxury brands have formulated clear medium-to-long-term transformation plans for China.

"Mercedes is launching the largest product offensive in its brand history," said Ola Källenius, Chairman of Mercedes-Benz Group AG, at the Mercedes-Benz Brand Day on April 23, 2026. By 2027, Mercedes will introduce over 40 new models spanning multiple powertrains, including several China-exclusive models.

BMW Group designates 2026 as its "product explosion year" and strategic deepening year in China. The all-new BMW iX3 long-wheelbase version, developed specifically for China, debuted globally at the Beijing Auto Show and will launch in H2 2026. In supply chain collaboration, BMW partners with CATL, EVE Energy, and Envision AESC to co-develop large cylindrical battery cells and advance industrial-scale production.

Also at the Beijing Auto Show in April, Audi globally premiered the all-electric SUV E7X, unveiled the new Audi A6L and A6L e-tron together, signed a deepened strategic cooperation agreement with SAIC Motor, and announced its Innovation Technology Center will soon land in Shanghai—a clear execution of Audi's "dual-brand, dual-partner, parallel ICE-NEV" strategy.

For now, workforce optimization has become the most direct survival tactic. Mercedes acted most decisively, launching internal restructuring in February 2025 with an overall optimization ratio of about 15%, focusing on sales systems and automotive finance. Affected employees receive a base compensation package of N+9.

For comparison, Tesla China's 2024 restructuring offered N+3, while Volkswagen China's 2024-2025 imported vehicle business layoffs provided N+6. Mercedes' generous package reflects its resolve to proactively adjust business structures amid market upheaval. By October 2025, nearly 4,000 Mercedes China employees had signed separation agreements; globally, Mercedes launched a sustainable talent reduction plan targeting 30,000 layoffs, cutting one-fifth of its global workforce.

BMW adopted a more "dignified" approach, announcing a "natural attrition plan" in China—non-permanent contracts would not be renewed, with staffing levels adjusting automatically to business conditions. However, earnings data reveals the truth: Excluding China's workforce reductions, BMW Group's global headcount would remain nearly unchanged year-on-year, indicating China as the sole driver of group-wide staff cuts. Meanwhile, BMW initiated dealer network restructuring in late 2025, closing or downgrading some outlets to service points, with adjustments slated for completion by mid-2026.

Audi has yet to announce major layoffs, likely due to prior internal integrations like relocating its sales headquarters to Hangzhou already aligning human resources. However, Audi AG has announced plans to cut up to 7,500 jobs globally over the next few years, aiming to save over €1 billion in annual operating costs by mid-term.

Parallel to layoffs, channel policies are being comprehensively relaxed. Since May, BMW, Mercedes, and Audi have collectively lowered dealer sales targets twice this year: BMW reduced wholesale assessment targets for some premium and NEV models to 90% of the previous year's levels, Audi implemented some store retail targets at 70%, while overall dealer task reductions reached 20%, 24%, and 22% for the three brands, respectively.

The dual strategy of layoffs and price cuts may ease cost pressures short-term, but deeper costs are emerging. As the Mercedes C-Class drops from a ¥300,000 list price to ¥220,000 actual transaction price, the BMW 3 Series enters the ¥200,000 range, and the Audi A4L's loan scheme dips below ¥170,000, the brand premium moats painstakingly built by BBA over decades are rapidly eroding. More dangerous than price wars is the marginalization of joint venture brands in product development. Take electrification: BMW sold just 5,680 pure EVs in China in Q1, with an electrification penetration rate below 4%.

OEM layoffs and plant closures are now rippling through the supply chain. Industry estimates suggest significant job multipliers in automotive—each OEM job cut affects about 7 related positions upstream. Channel chill is palpable: 4S dealerships nationwide have shrunk from ~34,000 last year to 32,900, with 1,100 outlets disappearing—meaning thousands of sales consultants, maintenance technicians, and insurance specialists have been forced to transfer or leave. Upstream suppliers face even harsher realities, with many fuel vehicle powertrain specialists seeing orders plunge, leading to layoffs, production cuts, and even bankruptcy filings.

In summary, joint venture automakers face triple pressures of shrinking sales, collapsing price systems, and overcapacity, prompting strategic retrenchment through plant closures, layoffs, and channel contractions. Whether this contraction yields a turnaround remains uncertain. Industry differentiation is accelerating: Some brands are swimming against the tide, increasing NEV R&D investment in China to reclaim market position through electrification; others are gradually deprioritizing China. For the global automotive landscape, this shakeout originating in China may merely preface greater transformations ahead.

Layout 丨 Zheng Li